Thin skin and subrogation do not go hand-in-hand. We are the crashers at every party and the uninvited guests that nobody wants to see show up when a personal injury suit has been filed.

Ashton T. Kirsch

Trial lawyers believe we take money from the pockets of victims, and defense lawyers believe that we make the cases they defend more difficult to resolve. Ours are the nuisance claims that are rejected out of hand because there simply are no consequences to doing so. And in workers’ compensation third-party cases, we are an opportunity for defense counsel to bill a file by noticing and taking the deposition of a workers’ compensation claims or subrogation professional who simply followed the law in paying benefits.

Understanding how and why this phenomenon has seen an uptick in recent years goes a long way in formulating responses to and handling of situations where lawyers try to intimidate busy insurance company employees into perhaps compromising their statutory lien rights by demanding chunks of their precious time.

The tactic looks something like this: An employee is injured on the job, hires a personal injury lawyer and files suit. The workers’ compensation carrier hires subrogation counsel, who promptly intervenes in the pending litigation. Or, as is our right in almost every state, we initiate a third-party subrogation suit because the employee has not done so.

Either way, we are persona non grata. The lawyers know it's an incredible inconvenience for adjusters and use this to their perceived advantage. The thought process is that if the adjuster is inconvenienced enough, he or she might consider reducing the lien to avoid having to fly halfway across the country for a needless deposition.

Once a workers’ compensation carrier intervenes in pending litigation, it has subjected itself to the jurisdiction and control of the court. Even though the claims handler might be in Massachusetts, the litigation might be pending in Texas. The parties to the suit have the right to depose anybody who might have information, knowledge or testimony relevant to the case. A workers’ compensation claims adjuster most frequently has “personal knowledge” only about the amount and type of workers’ compensation claim payments made. And such information is readily made available by subrogation counsel, is provided along with affidavits and is really a fact that can, and should, be stipulated to by all parties who do not have an ulterior motive for the deposition.

One of the reasons you are seeing this tactic more and more frequently is because it often works. Agreeing to chop off a significant portion of a workers’ compensation lien in order to obviate the need to pack a suitcase, negotiate TSA security lines and travel to another state occurs more often than you might think. And just like the pigeons scavenging for crumbs under an outdoor restaurant table, the more you feed them, the more they come back. It’s a legal form of intimidation and blackmail.

The federal court decision of Travelers Prop. Cas. Co. of Am. LLC v. Daimler Trucks N.A. LLC (2015) was not a workers’ compensation subrogation case but involved a fire loss subrogation suit filed by Travelers and is illustrative on this issue. Travelers was subrogated to the rights of its insured, but the issue was whether Travelers had to produce a witness in response to Daimler Trucks’ Federal Rule 30(b)(6) corporate designee deposition notice to testify regarding the underlying facts in support of Travelers’ claims. Any and all information known to Travelers employees about the cause of the fire was provided to them by their attorneys and was therefore work product and attorney/client privileged.

Despite the fact that the potential witness had virtually no information that was not work-product privileged, the court ordered the deposition to go forward but indicated that “any testimony provided" would be limited in scope to the underlying facts in support of Travelers’ claims. The witness would be required to testify to the underlying facts supporting the claim, even if the source of that information came from its insured and/or the claim file, and even if the witness had no firsthand knowledge of the facts.

However, the insurance claims witness would not be required to testify as to the claims themselves, including the application of facts to legal theories, intended lines of proof and inferences drawn from the evidence, which are forms of opinion work product that are protected from discovery. 

If your claims handler is going to be deposed, it is important to file a motion to quash or a motion limiting discovery so as to set the parameters of what will and will not be fair game in the deposition.

It is possible that the defense wants to determine if the claims handler has any independent knowledge, investigation of the facts, etc. And if so, the question becomes whether that information is privileged and/or exempt from discovery as either work product (in anticipation of litigation) or privileged (attorney/client communications). I also make clear to the other side that if a needless deposition is taken, there will be no compromising of the lien, no matter how poorly the development of the case goes. Whether that is a hollow threat or not, it does make the other side think a little. and two can play at that game.

The work product privilege and attorney-client privilege are incredibly powerful privileges that can make the experience of attempting to depose our claims handler very frustrating. Claims investigations involving subrogation counsel include communications relating to his or her understanding of the facts, opinions of relevant law, and subrogation recommendations given to the witness or the insurance company. Claim notes may contain actual attorney communications or summaries of them.

The work product privilege is governed by Federal Rule of Civil Procedure 26(b)(3):

• (A) Documents and tangible things. A party may not discover documents and tangible things that are prepared in anticipation of litigation or for trial by or for another party or its representative (including the other party’s attorney, consultant, surety, indemnitor, insurer or agent). But, subject to Rule 26(b)(4), those materials may be discovered if:
  • They are otherwise discoverable under Rule 26(b)(1).
  • The party shows that it has substantial need for the materials to prepare its case and cannot, without undue hardship, obtain their substantial equivalent by other means.
• (B) Protection against disclosure. If the court orders discovery of those materials, it must protect against disclosure of the mental impressions, conclusions, opinions or legal theories of a party’s attorney or other representatives concerning the litigation.

The insurance company must usually anticipate litigation at the time the documents were drafted for these protections to apply, and we have the burden of convincing the judge that the documents should be granted immunity. 

In Harper v. Auto-Owners Ins. Co. (1991), the court ruled that an insurer’s first-party claims files are presumptively not work product until a final decision is made to deny the insured’s claim and that to overcome that presumption, the insurer “must demonstrate, by specific evidentiary proof of objective facts, that a reasonable anticipation of litigation existed when the document was produced, and that the document was prepared and used solely to prepare for the litigation, not to arrive at a (or buttress a tentative) claim decision.”

To rebut that presumption, the courts look at (1) the length of time between the alleged date of anticipated litigation, (2) the date suit was actually filed, (3) whether the parties were working toward a resolution and (4) whether there was a clear intention to by one of the parties. The carrier’s burden is not fulfilled by mere conclusory blanket assertions. We have the obligation to provide the court with underlying facts demonstrating the existence of this privilege.

The court has to be able to ascertain when and why the document was created. Because an insurance company investigates claims in the ordinary course of its business, the boundary between discoverable documents and protected work product is not always clear. MWL has a memo regarding subrogation that it advises its clients to add to the claim file whenever subrogation or third-party liability may be suspected. It isn’t a magic bullet, but it doesn’t hurt.

Our firm pushes back hard against efforts to intimidate our clients by the taking of needless depositions. We have always prided ourselves on being “unobtrusive” in our subrogation efforts. File is referred, the client gets a few status reports and then gets a big check. Bam. That is all there is to it.

Our clients hate to be deposed, and in the unlikely event that we cannot keep them working hard at their desks, we make the experience as painless and quick as possible. The claims handler is fully prepared for the deposition and will be vigorously defended at the deposition.

In workers’ compensation subrogation cases, we do have the burden to prove our lien and unless it’s stipulated to, these depositions are a great opportunity to prove up our current lien (even though it may grow). We are prepared to offer the possible testimony we might need at trial (if the lien isn’t stipulated to) and even videotape the deposition for greater effect.

As always, subrogation is only as effective as it is cost-effective. It is truly an art that requires preparation, knowledge and discipline but in the end, is best treated as the shortest distance between two points.

Ashton T. Kirsch is an insurance litigation attorney and shareholder with the law firm of Matthiesen, Wickert & Lehrer in Hartford, Wisconsin. This blog post is reprinted with permission.